FINANCE LIMITED
Submitted to:
Dr. A.K.M. Saiful Majid
Professor
IBA, University of Dhaka
Submitted by:
Muhammad Hasibur Rashid Chowdhury
Student ID: ZR-1201002
EMBA, Batch No.: 12
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ACKNOWLWDGEMENT
This report is prepared as per the requirements of the Strategic Management (W-615)
course under the Executive MBA program of IBA. To provide this opportunity and
thoughtful guidelines I am grateful to the course teacher Professor Dr. A.K.M Saiful Majid
sir.
I would also like to thank some colleagues who have extended their cooperation to me for
preparing this mammoth task. I would like to thank Mr. Mir Tariquzzaman, GM & CTO
(IT) whom I have consultant several times on different issues. I would also like to thank
Ms. Bilquis Jahan, DGM & Head of HR for her patience and time she had provided to me.
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Table of Contents
Executive Summary....i
Chapter 1: Introduction..................................................................................................................... 10
1 Introduction................................................................................................................................ 10
1.1
1.2 Objective................................................................................................................................. 10
1.3 Scope...................................................................................................................................... 10
1.4 Methodology............................................................................................................................. 11
1.5 Limitations............................................................................................................................... 11
Chapter 2: Company Profile IDLC Finance Limited............................................................................... 12
2.1 IDLC at a Glance....................................................................................................................... 12
2.2 Shareholding Structure................................................................................................................. 12
2.3 Organizational Hierarchy.............................................................................................................. 13
2.4 Products and Services.................................................................................................................. 14
2.4.1 For Large Local and Multinational Corporate Houses..................................................................... 14
2.4.2 For Small and Medium Enterprises............................................................................................ 14
2.4.3 For Retail Clients................................................................................................................. 15
2.4.4 For Capital Market Clients...................................................................................................... 15
2.5 Board of Directors...................................................................................................................... 15
2.6 Management Committee............................................................................................................... 16
2.7 Memberships............................................................................................................................. 17
2.8 Key Financials:.......................................................................................................................... 17
2.9 Geographic Coverage.................................................................................................................. 19
Chapter 3: Organizational Strategy Analysis IDLC Finance Limited............................................................20
3.1 Critical Analysis of Strategy Making Hierarchy of IDLC.......................................................................20
3.2 Vision Statement........................................................................................................................ 21
3.2.1 Critical Analysis of IDLCs Vision Statement............................................................................... 21
3.3 Mission Statement...................................................................................................................... 22
3.3.1 Critical Analysis of IDLCs Mission Statement............................................................................. 22
3.4 Strategic Objectives.................................................................................................................... 23
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Executive Summary
IDLC Finance Limited is one of the leading non-bank financial institutions in Bangladesh.
Established in 1985 as the pioneering leasing company in Bangladesh, IDLC now offers a
wide range of products ranging from Corporate Finance, SME Finance, Consumer
Finance, to Capital Market solutions, through its presence across the country with 26
branches and over 600 permanent employees. Over the year, IDLC has developed a strong
strategic management process that clearly dictates organizational policy-making, strategy
development & execution, and overall organizational management in an efficient manner.
Both IDLCs Board of Directors and top management personnel are integrally involved in
leading this strategic management process in the most efficient manner by ensuring a good
strategic plan for the organization, remaining updated on organizational and industry
scenario, putting constructive pressure to achieve desired outcomes, taking corrective
measures for better strategic management, developing stronger competencies and
capabilities, and portraying strong corporate governance, ethics and CSR.
IDLC has always been well-regarded in the financial sector of Bangladesh for its corporate
governance practices, ethical integrity and transparency. Maintenance of an effective
Corporate Governance process remains a key priority of the Board of IDLC. Moreover,
IDLC has a strong Human Resource management system in place that focuses on key
areas such as maintaining a favorable work environment by embracing diversity and
inclusion; exercising non-discrimination and maintaining gender balance across all spheres
of IDLC; providing opportunities to employees and fresh graduates for both their personal
and professional development in the form of training programs, job rotation, succession
planning and internship opportunities; ensuring health and safety standards across all
branches of the IDLC Group while offering major benefit schemes and company
contributions to employees; and helping employees maintain proper work-life balance
throughout their stay at IDLC. These practices help IDLC attract and retain the best
professionals in the industry.
Based on the strategies adopted by its competitors and changing market scenario across
different business segments, IDLCs business units also differ from one another in terms of
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core strategies and focus areas. In response to a more mature market, IDLCs Corporate
business is mainly focused on service quality and efficiency, higher ticket size, and
improved portfolio quality, while its SME business is more focused on rapid product
innovation and increased presence through expanded geographic coverage to leverage the
most from the fast-growing SME sector in Bangladesh.
The major factors of IDLCs external, and immediate industry and competitive
environment, and their subsequent influence on its operations, have been identified
through PESTEL analysis and Porters Five Forces Model of Competition. PESTEL
analysis reveals major political, economic, socio-cultural, technological, environmental
and legal factors that influence IDLCs performance and strategic decisions. Major factors
include, but are not limited to, budgetary measures and various policies and regulatory
measures by the Government and Bangladesh Bank; changing demographics of the
population; greater reliance on technology to offer more customized financial solutions
and better services.
The Five Forces Model of Competition reveals strong market competition and rivalry in
the industry, low threats of new entrants due to high regulatory restrictions, high
bargaining power of both industry suppliers and customers due to intense competition
among rival companies and competing product offerings, and almost zero threat from
substitute products from another industry.
SWOT Analysis of IDLC reveals its core strengths in the areas of effective strategic
decision-making and execution, strong corporate governance, competent management
team, strong financials, diversified product portfolio and a prestigious customer base,
professional workforce combined with strong HR Management, strong technology
platform, superior customer service, and growing CSR commitment, thus leading to a
strong brand image.
In light of the above analysis, we may safely conclude that IDLC holds a strong position in
the banking and financial services sector of Bangladesh. By focusing more on balanced
strategic objectives; strong management leading to efficient strategy development and
execution; revising business models and strategies in a timely manner will provide better
results and competitive advantage.
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Chapter 1: Introduction
1 Introduction
In this report we will analyze the strategy of IDLC Finance Limited in terms of various
parameters. Those parameters are companys current strategies, what is the strategic
group, their impact of the different environmental factors such as five forces, PESTEL. We
will also go through the detail analysis on SWOT of IDLC.
1.2 Objective
Our main objective is to analyze the strategy implemented by IDLC both basic and
complementary, its strategic groups, different external factors such as five forces,
PESTEL, SWOT, banking industry life cycle, dominant traits of the whole industry, key
success factors and finally come up with recommendations so that IDLC Finance Limited
can do even better in the competitive market.
1.3 Scope
The report attempts to analyze the strategic management process of IDLC Finance
Limited, focusing on IDLCs strategic objectives, polices and guidelines developed and
executed by its Board and Management, and followed by its staff. To identify IDLCs
competition market position and major opportunities for the future, and accordingly
recommend required measures, a number of strategic management tools were applied,
including detailed analysis of IDLCs vision, mission and strategic objectives; strategic
group mapping of IDLC; PESTEL analysis and applying Porters Five Forces Model of
Competition to highlight influence of major factors related to IDLCs external
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environment and immediate industry and competitive environment; and SWOT Analysis
of IDLC. Accordingly recommendations have been provided in this report that may
contribute to further growth and improvement of IDLC.
1.4 Methodology
The report has been prepared by reviewing various policies, guidelines and reports of
IDLC. Moreover, references have been made from IDLCs Annual Financial Report and
Annual Sustainability Report, while key personnel from Corporate, SME, Consumer,
Capital Markets and Human Resources were interviewed for their opinion on various
issues related to IDLCs strategic management process.
1.5 Limitations
Due to confidentiality and sensitivity of certain information, detailed strategies, policies
and guidelines could not be enclosed with this report.
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CEO &
Managing
Director
DMD
DMD
Asst.
Asst.
Manag
Manag
er
er
Sr.
Sr.
Exec.
Exec.
Officer
Officer
GM
GM
DGM
DGM
Managerial
Hierarchy
AGM
AGM
Sr.
Sr.
Manag
Manag
er
er
Manag
Manag
er
er
Asst.
Asst.
Manag
Manag
er
er
Mgt.
Mgt.
Traine
Traine
ee
NonManagerial
Hierarchy
Execut
Execut
ive
ive
Officer
Officer
Prob.
Prob.
Officer
Officer
Senior
Senior
Officer
Officer
Officer
Officer
Suppo
Suppo
rtrt
Officer
Officer
Junior
Junior
Officer
Officer
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Term Loan
Lease Finance
Working Capital Finance
Project Finance
Refinancing and Special Funds
Corporate Advisory Services
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Mr. Asif Saad Bin Shams, GM and Head of Credit and Collection
Mr. Mustaq Ahammed, AGM and Head of Internal Control and Compliance
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2.7 Memberships
Association
Bangladesh Leasing and Finance Companies Association | Asian Financial Services
Association | Bangladesh Merchant Bankers Association | Bangladesh Association of
Publicly Listed Companies
Institute
The Institute of Bankers, Bangladesh
Chambers of Commerce and Industry
International Chamber of Commerce Bangladesh | Metropolitan Chamber of Commerce
and Industry | Dhaka Chamber of Commerce and Industry | Bangladesh German Chamber
of Commerce and Industry | The Federation of Bangladesh Chambers of Commerce and
Industry
International Memberships
International Factors Group (IFG) - an international association of factoring companies |
Small Business Banking Network (SBBN) - a global initiative to improve access to
financial services by small businesses
Sustainability Memberships
United Nations Global Compact | United Nations Environment Programme Finance
Initiative | CSR Centre of Bangladesh
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Corporate Strategy
Across the IDLC Group, i.e., IDLC Finance
Limited, and its two subsidiaries, IDLCIL
and IDLCSL
Business Strategy
Developed for each individual business activity
of the company, namely Corporate, SME,
Consumer and Capital Market Operations
Functional Strategy
Developing specific strategies and objectives
for each individual functions under major
Business areas, in line with the
organizations overall Corporate Strategy
Operating Strategy
Developed by Managers of
major geographic units &
strategically important
activities, such as human
resource management,
marketing & promotion etc.
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In spite of the above characteristics, the vision statement also has some major
shortcomings that should be addressed:
Not too focused: The vision statement does not provide a specific tangible goal to the
management to set their strategies and allocate resources accordingly. Also it does not
indicate what the company is doing to prepare for the future.
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Not distinctive: The vision statement fails to create a unique identity for IDLC. It
could be applicable to any other rival company competing in the industry.
Too reliant on superlatives: The vision statement only states that IDLC desires to be
the Best Financial Brand in country; however, it does not indicate any specific
strategic course of the company.
Quality
Growth
Superior
Customer
Experience
Sustainable
Business
Practices
Core objective of IDLCs existence and operation, that is, Sustainable business
practices.
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Integrit
y
Simplici
ty
Passion
Custom
er Focus
Core
Values
of
IDLC
Ecofriendly
Trust &
Respect
Equal
Opportu
nity
Act with integrity, competence, dignity and in an ethical manner when dealing with customers,
prospects, colleagues, agencies and public;
Act and encourage others to behave in a professional and ethical manner that will reflect
positively on IDLC employees, their profession and on IDLC, at large;
Maintain knowledge of and comply with all applicable laws, rules and regulations;
Deliver professional services in accordance with IDLC policies and relevant technical and
professional standards;
Respect the confidentiality and privacy of customers, people and others with whom they do
business; and
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It helps a company identify its direct and indirect competitors, and/or possible partners
within the industry;
It illustrates the ease or difficulty of moving from one strategic group to another;
It often helps identify future opportunities and/or strategic problems to the company;
and
It ensures the company takes into account views of its major stakeholders while
developing or assessing its strategies;
In consideration of the value chain components of the banking and financial sectors
industry, IDLCs close competitors include a combination of the following banks and
NBFIs:
Organization
Type
Bank
Bank
Bank
NBFI
NBFI
NBFI
The relative positions of IDLC in terms of its key financials have been provided below:
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Bank/NBFI
Total
Assets
Operating Profit
Income
after
Tax
NPL
Ratio
180,396
5,406
700
10.00
130,314
4,620
794
7.48
147,044
5,731
2,393
3.17
37,784
2,403
713
1.63
7,115
208
129
3.98
11,817
384
229
3.50
19,365
1,142
815
2.90
Comparative position based on Total assets (in BDT Million) and NPL ratio:
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Geographic Coverage
Pricing Policy
In light of the above, the following tables summarize the comparative position and
strength of competition among IDLC, BRAC Bank Limited (BRAC), The City Bank
Limited (CBL), Eastern Bank Limited (EBL), IPDC of Bangladesh Limited (IPDC),
United Leasing Company Limited (ULC) and Uttara Finance and Investments Limited
(UFIL).
Organizations
Geographic
Coverage
Market Segments
Served
IDLC
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BRAC Bank
City Bank
Eastern Bank
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IPDC
ULC
UFIL
5 branches located in
Dhaka, Chittagong and
Sylhet.
The competition is
particularly strong in the
Supplier Finance segment
considering ULCs strong
service capability in offering
this product.
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Table 2 Comparison of Strategic issues (Brand image, service quality and pricing policy)
Organizations
Product and
Service Quality
Pricing Policy
IDLC
BRAC Bank
Hence BRAC is a
direct competition for
IDLC in this regard.
City Bank
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Eastern Bank
IPDC
ULC
Sufficiently strong
product and service
quality.
Sufficiently strong
product and service
quality.
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UFIL
Sufficiently strong
product and service
quality.
Improved efficiency across the value chain, by striving to lower funding costs to offer
attractive rates, design flexible credit terms, and improving overall service quality and
timeliness to attract more customers;
Booking leading Corporate houses to improve quality of the portfolio, and ensure
continuous flow of business in future;
Developing new service capacities to offer better and unique financial solutions to
clients;
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Restricting the size of the Corporate team by not hiring for any new positions and
leveraging more from the existing ones; and
Zero / Slow expansion of physical presence through additional outlets or new branches
for Corporate and Consumer Divisions respectively;
Increased presence through additional distribution channels and sales outlets. In addition
to having SME presence across all branches of IDLC, SME has two dedicated Sales Centers in
Dhaka as well to attend to walk-in clients.
Expansion of geographic coverage by opening new branches in locations outside Dhaka with
flourishing SME business. At present, IDLC is contemplating opening of a branch in Khulna,
and another branch in North Bengal, which is currently taken care of by Bogra branch only.
More focus on strengthening the deposit base, thus having a source of low-cost fund
and competitive advantage in terms of lending activities;
Booking high net-worth deposit customers to improve quality of the portfolio, and
ensure continuous flow of business in future;
Developing new service capacities to offer better and unique financial solutions to
clients;
Restricting the size of the Consumer team, excepting Deposit mobilization team, by
not hiring for any new positions and leveraging more from the existing ones; however, for
deposit, the size of the sales team has increased in the last couple of years to allow greater
sourcing of deposits at IDLC; and
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Political Factors
Economic Factors
Socio-Cultural Factors
Technological Factors
Environmental Factors
Legal Factors
Corporate tax policies, affecting overall profitability of the company and its clients;
Tariff policy and trade restrictions, directly affecting business performance of IDLC
corporate clients involved in foreign trading;
FDI policies, dictating growth opportunities for both existing and new business;
Environmental regulations and labor laws, requiring greater compliance by clients and
higher due diligence by IDLC while making credit decisions;
Political stability of the country, dictated by the government and opposition parties,
greatly affecting the overall economic performance of the country and subsequently the
performance across all industries. And due to bad business spells suffered by clients,
IDLCs business performance also suffer negative consequences.
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Favorable savings policies, boosting deposits in IDLC, thus allowing higher lending
activities;
Restrictive policy measures by Bangladesh Bank to control money supply and inflation
determines lending rates for banks and FIs, ultimately affecting overall organizational
performance.
Population growth generates more demand for financial services, resulting in opening
of new branches and geographic expansion;
Increasing literacy rates brings more people under the umbrella of formal banking and
financial services;
Lifestyle changes leading to the introduction of new and innovative products and
services to suit unique and ever-changing needs of the diverse client groups;
Adoption of Oracle Flexcube Universal Banking Solution (FCUBS), the new Core
Banking Platform that became operational across IDLC in January 2012, making
IDLC the first non-banking financial institution to use this platform. This system has
enabled creation of a number of satellite systems to further enhance IDLCs
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operational efficiency and MIS generation, and we are on our way to complete two
years of efficient operation on this platform.
Unified communication network, linking all branches and employees of IDLC across
various geographic locations;
New business opportunities arising through various policies and regulation issued by
the government. For example, mandatory installation and use of ETP (Effluent
Treatment Plants) in sectors such as textiles provides a new financing opportunity for
IDLC for this purpose. Moreover, attempt of the Government to make brick fields more
environment-friendly also offers a significant prospect for IDLC to extend financing in
a new sector;
Green Banking activities and guidelines issued by the Bangladesh Bank not only
requires all banks and FIs to focus more on environmentally sustainable projects and
sectors for commercial lending, but also to streamline its internal operations and
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Interventions by the Bangladesh Bank and Securities and Exchange Commission, the
two regulatory bodies of IDLC, influence the strategic decision process of the
organization;
Being an NBFI, IDLC is not authorized to perform current and foreign currency
transactions.
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Substitute
Products from
other
Industries
Supplie
rs of
Resour
ce
Inputs
Rivalry among
Competing
Sellers
Buyers
/
Clients
Potential New
Entrants
The following chart summarizes strength of the impact of these five forces, and their
probable influence on IDLC:
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Majority of the NBFIs in Bangladesh offer specialized products and services. IDLC is
one of the very few leading NBFIs offering a diversified portfolio of products and
services covering all branches of financial services. Hence IDLC is in a stronger
position compared to majority of the market players in the NBFI segment.
IDLC retains the strongest professionals in the market graduating from leading local
and international universities, which is a major competitive advantage over its NBFI
competitors.
IDLC, being an NBFI, cannot offer trade services such as opening of LCs, overdraft
and other working capital facilities, as well as dealing with foreign currencies. This is
a significant disadvantage for IDLC considering other competing commercial banks,
many of which are dependent of these services for their revenue stream.
Being an NBFI, IDLC has to borrow funds from other banks which are then markedup and channeled to clients as term lending. Hence by nature IDLCs lending rates are
higher compared to rival banks, which is another significant disadvantage.
There market players offer closely standardized products and services. This mainly
results from the high regulatory requirements in launching new products and services.
Hence clients can easily switch between brands, thus raising the competition.
The leading players in the market are regularly coming up with innovative products
and new marketing strategies to attract and retain more customers, and thus capture a
greater share of the market. Hence regular strategic revisions are mandatory to remain
profitable in the market.
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The threat of new entrants is low for IDLC considering the following factors:
The banking and financial sector is a highly regulated market, with large initial
investment requirements. This significantly raises the entry barriers, thus weakening
threats from new entrants for the existing market players.
In the backdrop of the lingering effects of the past financial crisis, and major scandals
like that of the Hallmark Group, many public and privately owned banks and FIs are
struggling to make a profit, or even remain in the business. This reduces the likelihood
of new companies entering this market in the near future.
In the present financial situation of the country, investment is at a declining rate, while
clients are more cautious in availing facilities from banks and financial institutions.
Thus demand at present is declining, making it more difficult for new companies to
enter the market.
The leading market players strongly capture a significant portion of the market. Hence
it will be difficult for new entrants to lure away customers and gain a considerable
market share.
Rival banks and financial institutions, in the form of inter-bank exchange, which is
mostly determined by market forces;
Individual and institutional clients, in the form of term deposits. Owing to high
competition in the market, deposit clients are more rate-sensitive and hence have a
greater bargaining power over IDLC, requiring higher interest rates on their term
deposits; and
Refinancing facilities of Bangladesh Bank and foreign funds from many development
organizations, having considerable influence over IDLCs performance and
compliance process to consider it eligible for availing those funds.
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Low switching cost for the consumer groups due to largely standardized products and
services offered by the competing companies;
For Corporate Financing products, banks and FIs opt to add the leading large local and
multinational corporate houses in their portfolio, not only in considering of large
business volumes but also to increase the quality and brand value of their overall
portfolio. Hence this provides significant bargaining power to the client groups.
For the banking and financial sector, hence, threat from Substitute Products is almost
non-existent considering the nature of its products and services.
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Strengths
Opportunities
Weaknesses
Threats
Regulatory Restrictions
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Considering all the above facts, we see that Bangladeshs banking industry is still in
growth stage.
Figure: The life cycle curve shows in which stage Bangladeshs banking industry is in
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Market Size
&
Growth Rate
No of
Industry Rivals
Technological
Changes
Bargaining
Power of
Customers
Product and
Service
Differentiation
Demand-Supply
Conditions
Market Size and Growth Rate: The market size and growth rate is an important
indicator of future business prospects of the market players, showing level of product
and service innovations required for the future, and strategic measures needed to secure
existing market position and capture new market share.
Degree of Product and Service Differentiation: There is not much scope of high
product differentiation in the financial services industry, which leads to heightened
competition in terms service quality and pricing strategy among the competitors.
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significant opportunity for the existing market players to expand their business, and for
new entrants in the industry.
Increasing
Globalization
Changes in
Customer Profile
Product
Innovation
Technological
Changes
Regulatory
Influences
Government
Policy Changes
Changing
Societal
Concerns and
Lifestyles
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The following section identifies impact of each of these driving forces in shaping the
industry, while offering an insight into the external environmental factors affecting the
industry:
Technological Changes, which is crucial in todays world to provide faster and more
efficient service, also customized as per client needs;
Regulatory Influences, which is a significant driving force for banks and FIs. This
being a highly regulated sector, banks and FIs must be fully compliant to the policies
and regulations of the Bangladesh Bank, and the Securities and Exchange Commission
in terms of capital market operations;
Government Policy Changes is another major industry force, since it affects not only
the operations of the banks and FIs, but also those of their clients from different
industries, which results in change of strategies for banks and FIs; and
Changing societal concerns and lifestyles, raising demands for more sophisticated
savings and loan products and complete financial solutions for both individual and
institutional clients.
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Update the vision statement to add more specific and tangible goals and targets;
Improve gender balance and thus add a new dimension to the strategic decision-making
process;
Continuously update its strategic group mapping to have clear understanding about its
market position and close competitors, and accordingly develop or revise strategies to
respond to strategic moves of its competitors;
Focus more on SME financing activities and capacity development of small and
medium entrepreneurs to leverage more from a growing sector and create new client
groups;
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Use intense market competition as a driving force for greater innovation in terms of
product and service delivery, quality, and financial solutions;
Improve its core strengths even further to continue holding a strong competitive
position in the market;
Leverage on the market opportunities identified through SWOT Analysis, such as green
financing, growth in SME lending, priority team formation under Consumer Division,
financial literacy for stakeholders to create new client groups, leveraging more from
marketing communications activities, and expanding its geographic coverage through
increased branch network;
Engage in more CSR activities benefiting its major stakeholders, environment and the
community, and thus create a unique brand position for IDLC
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